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Hugh Pickens writes "Warren Buffet once said that the best businesses were economic castles protected by unbreachable moats. Now, Erick Schonfeld writes that if search is Google's economic castle, Android is a moat, Chrome browser is a moat, and Google Apps is a moat — all free products, subsidized by search profits, intended to protect the economic castle that is search. 'Android, as well as Chrome and Chrome OS for that matter, are not "products" in the classic business sense. They have no plan to become their own "economic castles,"' says Benchmark Capital VC Bill Gurley. 'They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free).' So don't measure the success of Google's new businesses by how much revenue or profit they generate directly but measure it by how much they shore up Google's core search business. 'Google is ... scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.'"

Google Alerts is a watch tower, and Analytics is for planning a defence. If the invaders managed to cross the moat, FeedBurner can be poured of them as a last line of defence.Google Buzz, URL Shortener and Blog Search are for torturing and extracting information from captured soldiers.

Search is the command center and SCVs. Google Apps is the marines, Chrome is the bunker, and Android is the seige tanks.

I was just writing that to be a smartass, but after thinking about it, it actually makes a much better analogy. The whole "castle and moat" analogy is weak, because castles don't actually produce anything: they're defensive structures, just like the moat.

Or it could be that you missed the entire point of the article. The point of the article is that the only product that Google really cares about is search, and that everything else is just filler that doesn't even have to be bring in any revenue on its own. From that perspective, the analogies are actually quite illuminating.

You missed the point of what khasim was saying. Yes, search is their core product that is presented to the public, but their revenue is driven by their advertising. The more people search, the more targeted ads they see. Their real core product is advertising and has been ever since they went public.

The part I don't get is how Android, Chrome and Chrome OS is "scorching the earth for 250 miles around Google". What are those offerings doing that prevent a viable search competitor from rising?

I don't agree with the hyperbole either, but I think the point the submitter was making is that by keeping their free products and services in the forefront they maintain dominance. Then there is the fact that the vast majority of users won't bother changing to a competitor on Google provided platforms/mediums. Google is continuously honing their search algorithms as well, making it even harder for a competitor to step up.

To push the metaphor further, remember those beasts scorching the earth all need to be fed. They need more food everyday as they grow. The castle needs to be able to sustain itself, plus feed the beasts. So far, they have not been eating many apples.

I might agree with the... strong language. We might be in an age seeing the rise of tech oligarchies. Now that Microsoft has absolutely dropped from the Borg colossus to "just a big rich business", Google (as well as Apple, and yes, Linux itself!) have emerged to push away the era when "any of a thousand choices will do". (It used to be Any PC box + MS, then Any hardware phone + a carrier).

So now we have a complex interplay where Google is developing best-in-breed services *beyond* just raw search. Consume

The web browser is the physical display mechanism for the web, and in particular, Google's homepage and Google's ads.
Whoever controls the browser controls how ads are displayed or hidden, so they control Google's cash cow.
It's in Google's best interest to make browsers free commodities, otherwise companies such as Microsoft or
Mozilla would have huge power over them.

Barriers of entry (what Bill is basically describing) is a concept they teach you in high school economics - which also has absolutely nothing to do with what Google is doing with Android right now.

Google already has a massive stranglehold on search. Android on the other hand is a way for them to deliver Google "cloud" services (of which search is only one aspect) so that they can start monetizing and diversifying their non-search income. They are making money through Checkout (via Market), and stuff like G

Barriers of entry (what Bill is basically describing) is a concept they teach you in high school economics - which also has absolutely nothing to do with what Google is doing with Android right now.

Android brings people closer to Google, creating a barrier to using Bing instead.

Google already has a massive stranglehold on search. Android on the other hand is a way for them to deliver Google "cloud" services (of which search is only one aspect) so that they can start monetizing and diversifying their non-search income. They are making money through Checkout (via Market), and stuff like Google Apps for Business (via Android's seamless sync with Gmail and Calendar), etc. With the latter, it is a route for Google into the enterprise. I've just seen 3 companies I work with drop their legacy Exchange infrastructure for Google Apps.

I think you vastly overestimate how much money Google makes from their non-ad endeavors. Google may benefit from the income these other services bring in, but the point of this analogy is to show that these things all must serve to protect the castle. If Google were to try to turn one of their moats into another castle, they weaken the defense of that castle while simultaneously creating a new castle which they must defend.

"The part I don't get is how Android, Chrome and Chrome OS is "scorching the earth for 250 miles around Google". What are those offerings doing that prevent a viable search competitor from rising?"

a) Because they are free, they are preventing other businesses from creating a new and cool front-end or traffic redirector to search engines---because they can't compete against free and make money. If some other business arose which turned out to produce a popular piece of software, some other business could be

Google is really cutting edge in terms of their technology but the business model is really old school. Distribute information at below the cost of production, but make a profit by selling advertisements next to the information of interest. It's actually the same model that was used for newspapers, magazines, radio, and TV. They're now applying it to YouTube by putting ads in some of the clips, so here they're moving away from their core business of search but still doing the same "give away information, pr

Recently I was thinking about methodologies, and all the methodologies I've tried over the years. They all worked for me, but eventually fell out of style because they didn't work for enough people.

Now I think I know why.

Methodologies are like... er... analogies. They're both models of a sort. A really pithy model so seductive that its users can lose sight of the actual problems they're trying to solve or describe. Businesses and products are complex things, and you can't boil them down too far before

Google's position is extremely precarious for two reasons. First, there isn't anything that prevents the majority of its users from switching to a rival search engine.

Oh, but there is: Google is better. At least, that's the premise on which Google operates. They do what's necessary to make the Web and the Internet in general more amenable to sharing data, searching, etc. and use their engineering skills to separate themselves from the pack.

Recently, they realised that the only way they could maintain a landscape conducive to their style was to give Microsoft a kick in the pants. Hence the Chrome browser. Likewise, Apple's walled-garden approach was a threat to their long-term survival, so they created Android. The 'scorched earth' phrase is a poor one, because Google is really doing the opposite, they're opening fertile new ground in order to give the population somewhere to move.

If we absolutely need a territory-based analogy, then Microsoft is a slumlord. It didn't set out to be, but all those little ticky-tacky sheds quickly degraded and the poor roads and communications made policing difficult. Apple, on the other hand, is a city planner. It creates gated communities that offer you everything they imagine you could want, all within the perceived safety and comfort of their ivy-covered walls.

Google wants something completely different. They want an Oklahoma Land Rush - rather than seeking to contain and corral people into their own plantation (sorry), they want a generation of homesteaders. They're confident that the homesteaders will keep coming to them for materials because they believe in the quality of their engineering.

Second, the vast majority of its users cannot reach its services except by using Microsoft products. Therefore Microsoft is trying to leverage its monopoly position on the desktop and in IT to nudge people away from Google toward Bing.

Hence the need for Google to move the stakes. They're not interested in fighting over Microsoft's turf; they're interested in creating new territory. Territory that, not coincidentally, they feel confident they can dominate.

Microsoft is playing itself into a holding action. They are on the defensive, trying to hold onto what they have, and all the while people are leaving the slums for an often ragged and imperfect existence, free however from the constraints that once bound them.

None of this should be taken as an endorsement of one tactic over another. The preceding is simply an effort to explain the lay of the land.

if google search is a dune buggy in a mad max movie, chrome is the leather clad hockey mask wearing psychopath in the gun turret, and android is that weird dude with the japanese mask suspended above his head snarling and leaping from one vehicle to the next. microsoft is tina turner. apple is mel gibson. do you understand yet?

If it's been said once, it's been said a million times. Search isn't the product. Viewers are the product and they're being sold to advertisers. The moats are there to keep you in, not to keep other people out.

If it's been said once, it's been said a million times. Search isn't the product. Viewers are the product and they're being sold to advertisers.

Yes! Someone who gets it!

The moats are there to keep you in, not to keep other people out.

Wait, what???? No, no, no!
Look, Google does a damn good job of giving advertisers targeted viewers.
And they get LOTS of viewers because the viewers like the products that Google entices them with (search), and are willing to pay the cost (advertisements).
Google doesn't have to keep anybody in - the people want to be there!

So what does Google perceive as a threat?
Simple - anything (and I mean anything) that keeps people from being able to access their products.
Browsers suck? Well, let's build a browser that's fast. Google doesn't care if it wins the market, as long as all the other browsers become faster in an effort to compete.
Cell phones too locked down? Let's make an open operating system for phones, and make sure that at least one phone model is standard setting. Google doesn't care if that phone wins the market, as long as it sets a standard for all the other smartphones.

Perhaps the analogy works better if you say that search is the castle, the competitors keep people from the castle with their moats, and Google's ancillary products are the various drawbridges made to make sure the plebs can always access the castle.

First off, quite a few users will use whatever search engine is in their browser - that's Bing's market share right there. If you get word out Chrome or Firefox is better, you also won a Google search user. Second or as a consequence of the first, who controls the defaults matter. Google has a deal with Mozilla, obviously they don't need a deal with themselves. Less money spent and no risk they'll partner with someone else.

So they put up a Google platform for cell phones. You want to ship a cellphone on tha

Google does care about winning in for example the cellphone market. If Windows Phone 7 were the winner, that would mean a lot more search revenue for Bing at the expense of Google. If iOS won, then their continued search revenue would depend on them continuing to persuade apple to keep them as the default search provider and mapping service.

Even if Android wins, they still have to persuade carriers to keep Google as the default search provider. Gogole has no leverage over carriers because they give away the OS for free.

They don't give the whole OS away for free. You don't get the newest version for free, and they never give away the full version unless you agree to a set of requirements.

Google hopes that it'll just be easier to agree to the terms than replicate the missing parts and bypassing Google altogether. Carriers and handset makers don't really like this, and have been highly motivated to replace Google with their own services, and now Amazon looks to be trying to do just that on their own.

Google is a honey pot for what was previously inaccessible to advertisers: Every detail and statistic about your personal online life. If your a gmail user, the content of your personal emails, if your a latitude user, exactly where you go and if you are a Google Voice user, all your private phone calls. All an awesome mine of data, thats now extending into the real world. So viewers aren't the product, it's the detail of your life that is highly desirable and invaluable to anyone who wants to get at your m

Now, I've only read the summary, but it strikes me that Search is *not* Google's castle. Ad sales is the castle, search is the... the... quarry from which the rocks that build the castle are derived. Handily enough, the quarry is circular and moat-shaped.

Search drives Ad sales, which makes it the core of Google. They usually don't link any of their products with ad sales directly. So I believe identifying Search as the castle is still correct. Search is to Ad sales as Castle is to "safe and well-being"

This is not what Buffett meant, and anyone who follows Buffett knows that "moats" are the IP, patents, and low-cost advantages [morningstar.com] (among other things) that protect a company's business assets. Chrome OS, Android, etc. do nothing to "widen the moat" (other than maybe some name recognition). Slashdot editors: Please do your jobs and edit. This is a bad article that deserves to be ignored as worthless drivel by a Google shill.

Munger said it [fool.com], not Buffett. In fact, Munger was referring to the pay-per-click business model, with no mention made of Android, Chrome, or other free offerings. I stand by my original position that the/. article is nothing more than a Google shill at work.

What impresses me the most about Google is that they, as a company, have consistently taken actions that demonstrate long-term thinking. They will try things that have no short-term profit, just because in the long run they might either make a profit or defend the company's interests.

From the beginning, Google has helped Firefox out financially; more recently, Google made its own web browser. Why? Because it wasn't in Google's best interest for Microsoft to have any kind of leverage over the Internet, or in particular over which search engine is the default on computers. Remember how much market share Internet Explorer used to have? Displacing it once seemed hopeless, but Google went for it.

Google has poured resources into Android and continues to give it away. Why? Because it wasn't in Google's best interest for Apple to have leverage over the cell phone market, or in particular over which search engine is the default on cell phones.

Google spent about $100 million to buy On2, and then gave away the intellectual property they had bought. Why? Because the FSF wrote an open letter... nah, just messing with you to see if you are paying attention. Because, in the long run, Google's YouTube needs a suitable video format. If YouTube's business utterly depends on patented technology such as H.264, Google will have no choice but to comply with any and all demands from the licensing authority. Google is willing to not only spend the $100 million, but to pay more people to keep working on WebM (doing things like free reference designs for hardware decoders). Google doesn't ever expect to make money on WebM; it's purely a defensive move, to control long-term costs in the future. (Well, also, Google has lots of geeks like us who want to help keep web standards open.)

Heck, go all the way back to the early days of Google. They took the time to write a complete vertically integrated software stack, one which allowed them to get reliable performance out of dirt-cheap off-the-shelf hardware. The reason Sun was printing money during the Internet boom was that everybody who wanted a web server would buy an expensive, reliable Sun box to run it on; not Google, they used the High Availability stuff on Linux, and the elegant Google MapReduce, to weld together masses of cheap motherboards into a powerful and reliable server operation.

Remember the news stories about Google buying up the "dark fiber"? Google bought a bunch of optical fiber with no immediate use. Long-term thinking: "the stuff is cheap now; we have the money now; someday we'll have a use for this."

Google has a lot of other products and features, but for the most part those are just fun sidelines. When you are as big as Google, you can afford to do some side projects just for the heck of it, and all the better if they actually turn a profit.

Thank you, someone finally gets it. Maybe you could have word with all the analysts who consider the Nexus a massive flop on Google's part. They just don't understand that the point of the Nexus isn't to make a profit, it's to establish a standard implementation that makes Android a viable competitor to the iPhone. Because Google knew that at some point, Apple would want to create their own ad network on the iPhone, and Google would be cut off from that. Apple did, but by then, Android had established itsel

Google's brand used to be gold, now it is shit. They were seen as doing no wrong, but now it is the opposite. They used to be lauded for simplifying search and making it accessible, now they are known for complicated products. Their search engine is a spam engine.

I use Blekko for search, because it is the best, yet costs the same as Google. It is so much better than Google! I use Apple devices because they are the best, yet cost the same (or less) as their competitors. Even a free Android phone has a larger

Although there are already many startup advices that ask entrepreneurs to identify who is their customers, it is only until recently I understand what it really means.

Customers are the people who pay you money, and products are the things that your customers is paying for. People who *don't* pay you are not your customers, and things that you give away for free is not your products.

Web technology companies have more complicated business models because it is usually not just about building something that you call "product" and sell it to your customers. Instead, most web sites use their core technology to build something that is free and give it away to people, who we call the users. When there are enough users, the websites turn the users into products and sell it to their customers.

Google is a typical example of such business model. Almost all of the Google "products" that we know today, including the search engine, Gmail, Google Maps, YouTube, Android, Chrome, etc are NOT Google's products - because Google is giving them away freely. Free services are NOT products because there is no way to get money from it. To understand what is Google's products, we have to see where it's revenues come from - Adsense, that's right, is Google's real product.

But if Google Search et al. are not Google's products, does this mean that they are not important? No, because those are what allows Google to make great products - it's users. Google will continue to provide more free services to it's users as long as the added cost is believed to directly bring more revenue to Google.

Ok but everyone understands that, but what's the point of identifying what is product and what is not? Well, the notion of products and non-products is very important when it comes to competition. When a non-product enters an existing market to compete with other products, it becomes disruptive and can potentially make many competitors out of business. This is because non-product can be given away free but products can't.

This is why Gmail was disruptive to the email market because it was the first email service that do not rely on pro accounts as their product. Google identified that Gmail is not their product and therefore willing to provide so much storage space and features because they believed that doing so allows them to build better products (more users) and get more revenue from their customers (advertisers). When Gmail competed as a non-product, it became almost impossible for competitors to compete unless they changed their business model to something else other than pro accounts.

The same could be say for Microsoft IE vs Netscape. While Microsoft could be partly blamed for their anti-competitive practices, it is also clear that Netscape had a fatal business model of identifying the wrong thing as their product, making it failed to compete with IE when it became a non-product.

I had a hard time to understand how YouTube really works as a business, because it's so hard to understand how to pay for so much bandwidth just for users to watch free videos. But the answer is actually quite simple - YouTube is free because it is NOT Google's product.

If something is not your product, do NOT ever think of getting your money back from your users. Just give up your damn mind and give it away free generously, as long as you can make a product out of it.

You should have also realized that Android is not Google's product. But there is an important distinction on the business model between Android and iPhone - Google do realize that Android users are the product to sell to the App developers, who are the customers; but for Apple it's products are the iPhone and it's apps, and it's customers are the consumers who buy iPhones. The difference in business model makes it obvious how Android is different from iPhone - that Android developers are Google's top priority while Apple treats it's iPhone developers badly; Apple's iPhone is designe

Google's product is eyeballs. Who wants to buy eyeballs? Advertisers. Ergo, Google's customers are not those of us who use their Web-based applications (search, Gmail, Apps, et al.). Offering useful, alluring apps (and platforms) to users is how Google "grows its crops" or "builds its inventory" of eyeballs. The more we use their stuff, the better they get to know us and that allows them to offer something advertisers really, really want very badly: well-targeted eyeba

Just hold on a minute, you're telling me there are ads on the internet?

In all seriousness though, I'm very thankful for adblock. Users too dumb to use it subsidize an ad-free internet for me full of rich and useful services (like Gmail) that I don't have to pay for--people who see the ads pay for them for me. The internet breaks the free rider problem since it'll never come crashing down for people like me like it often does in real world cases. There will always be millions more users who don't know how to

Carriers don't default to Google's search on Android because it's Android. They do it because they think it's what their customers want, and/or Google pays them the most money. That can change overnight, and Android and Chrome (being open source) could not even lean against that wind, let alone stop it entirely.

Google is... scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.

Perhaps my perception is skewed because I rarely use Google for searches any subject beyond technical research, but they have been going downhill lately. A couple of years ago I could input just about any error message or problem description and get relevant results. These days I'll be lucky to get two pages worth of one question that is kind of relevant to mine, repeated in eighteen different formats. The recent trend seems to be to leverage Usenet, or social.microsoft... and whatever "relevant" subject matter is there. Their search results have been gamed for the worse and they do not seem to have a solution to it. I have gone back to doing what I did before Google came around, going to the vendor's websites and support forums in search of answers. It is not completely Google's fault. It was only a matter of time before people figured out how to game the algorithm for profit.

I suppose that is the inevitable conclusion of trying to monetize something. It creates the incentive to game the system. My most recent non technical search was for bellini (the champagne cocktail). The first result was a children's furniture store. The second was a Wikipedia page. It wouldn't surprise me if the first result was paid for.

So a company having a successful business model and dominating the market is evil? Got it. If all markets were dominated by companies like Google, the world would be a much better place. Are they perfect? No. But they're trying dammit.

So a company having a successful business model and dominating the market is evil? Got it. If all markets were dominated by companies like Google, the world would be a much better place. Are they perfect? No. But they're trying dammit.

Oh please, stop white-knighting for the multi-billion dollar international corporation. They aren't trying to be a force for good in the world. They're trying to make money.

So a company having a successful business model and dominating the market is evil? Got it. If all markets were dominated by companies like Google, the world would be a much better place. Are they perfect? No. But they're trying dammit.

Oh please, stop white-knighting for the multi-billion dollar international corporation. They aren't trying to be a force for good in the world. They're trying to make money.

Google does try to advertise itself as a force for good and that is part of the sales pitch to prospective recruits. There is some truth to it: in general, more open is more good. In general, don't be evil is a mighty good rule to live by. Now if veteran Googlers would just take that seriously, not just the starry eyed recruits, then Google might avoid going down the morality drain as Microsoft did.

Not really, I think it's a valid conclusion to reach that that was the point of his post in a thread about google securing it's business model and dominating the market. This wasn't a thread about ethics, laws, or anything similar. It was about successful business practices, so without any quantifier to state differently, I would assume it was a direct response to that. Otherwise, it's off topic.

The problem is that you invented content that wasn't there. There was no allusion whatsoever that Google was evil for being large or dominant. There was no indication that the poster was tying this into the story in any way at all except that it was about Google.

Feel free to use your imagination to fill in the gaps, but don't pretend like the opponent you are battling is the one you are replying to. You were battling an imaginary version of him.

Everyone remember: Google promises that they will do no evil, so you know it's true. After all... they say so.

Well, if I had to pick which one of the major software companies is the least evil, it would be Google. They're open source friendly, create innovative products, I've never read of Google patent trolling other companies, they generally have a good reputation.

Everyone remember: Google promises that they will do no evil, so you know it's true. After all... they say so.

Well, if I had to pick which one of the major software companies is the least evil, it would be Google. They're open source friendly, create innovative products, I've never read of Google patent trolling other companies, they generally have a good reputation.

Google also gives you free stuff and helps you find porn. How much questioning are you going to do of it?

Just because they have most of the search market doesn't mean they're being anticompetitive. They're just the best at what they do, for now. As soon as some other company invents the next great search engine, there's nothing Google will be able to do to keep people from defecting if they so choose. Contrast that with Windows where moving away to something else can be difficult or impossible depending on the software needs of the end user.

Besides, I thought Google's main focus was advertising, and search was just a delivery vehicle, just like Android, Docs, and everything else they give away for free.

Google's main revenue stream is advertising. Their main focus are web-based software technology products, particularly search. Much the same way that ABC or CBS also have a main revenue stream from advertising, but their main focus are entertainment video products.

Search isn't an issue, Google isn't the first company to dominate the search market, the real problem is the advertising market. Ad space gets more valuable the more eyes look at it, consequently, advertising is a market where you shouldn't be allowed to buy out the competition, especially if you're the number one firm buying out the number two. Now that that's been done, there had to be consolidation of the rest of the market just to compete.

Microsoft's strategy has been establishing a lock-in to the Microsoft ecosystem. Google strategy is to disrupt lock-ins that would in turn potentially disrupt access to their core businesses.

We're still talking big business with both Google and Microsoft. But those who point out that Google is such a business and everything is about making money are missing the point. Google's actions might not be entirely altruistic but their strategy is considerably more in line with consumer rights, and many hacker

They're very good at ensuring you're not locked in to them as well. You can export your data from pretty much any of their services. I think I read a while back where they have a 'free data team' whose job it is to ensure that's the case. Damn nice to see.

Look at it like this: people always ask for a Kleenex, but Kimberly-Clark Worldwide Inc. is not a monopoly, even though there branding is synonymous with 'facial tissue' in common language. Same with dozens of other products; band-aid, Xerox, Asprin, velcro, and many others, its a genericized trademark. While most companys fight tooth and nail to prevent this from happening to there trademarks, Google has sort of let it slide. Now, If Google was out buying up and/or forcing other search engines out of bu

Yeah, I think less than free is meant to imply "them" paying "you" in the sense that Google will pay you to use their products. And frankly, they already do that to some extent. There are folks on YouTube with sponsored, or registered or partnered channels or something like that. Google pays those folks to keep producing YouTube content. Google AdSense is set up in such a way that you can slap it on your own blog or website or whatever and get paid to have random people click on the useless shit you have to spout off into the internet voids. I would even wager, though I am not entirely certain, that Google probably is willing to pay out some cash to Android app developers whose apps are used enough to generate advertising revenue were they to include some kind of embedded ad with the app.

So yes, Google "gives" you stuff for less than free in the same sense that your employer gives you the tools you need to do your job for "less than free." They pay you to utilize the tools they want you to use to produce a product that generates more profit for them.

We'll see. So far, this is Google's standard operating procedure for any major release, and even some minor ones.

In the past, as now, they partnered with exactly one OEM, on one hardware platform, for the new release. For Honeycomb, this was Motorola and the Xoom tablet, and sure, Motorola most likely paid for the special treatment. But this is smart on Google's part -- they have exactly one platform to worry about, and they have direct involvement from that hardware's developer.

I tried Amazon Appstore the other day, and it was sad that not only the app itself works better than Market ever did (hey, at least it didn't force close on me so far; and it doesn't scroll page to top when you go back to it!), but that the app selection is very good, too. I found practically everything that I already have installed via Market there, and meanwhile there's no obvious garbage to be seen.